Information Technology Education » Competitive Advantage

Strategy Driver for Global or International Business – Information Technology

admin — Thu, 28 Jan 2010 09:18:32 +0000

This is the fourth installment of a five -part series on global corporate leadership. This article focuses on Information Technology

Economics (Debt)

Environmental Factors

Political Factors

Technology

Social Factors

The series taken as a whole should help you define the answers for your company to these nine questions:

Who are the customers of the future?

How will my company distribute its product or service in the future?

Who will be my competitors in 10 years? 25 years?

What will the source of my company’s competitive advantage be in the future?

What skills or capabilities will make my company unique?

What role will strategic alliances/ mergers/acquisitions play in its strategy?

How will my firm alter the nature of competition in its industry?

How will my organization redefine the boundaries between industries?

What can my company do to create a new industry?

The Opportunity

For many years, companies have devoted more than half of their capital budgets to information technology, and have acted under the simplistic assumption that ‘improved information’ results in increased productivity. The same companies have not based their computer investments on careful calculations of returns or added value, but rather on cultural and political concerns. Successful information systems must focus more on relationships and interaction than on the information itself.

The Solution

Tomorrow’s strategic technology investments will present more choices for organizations than they will know what to do with. Companies will be able to set up the technology that best fits their organization rather than the other way around. The value that organizations gain from these investments will depend on the foresight and intelligence that go into determining how their people will use technology.

There is a cliché that goes something like the following: If organizations only had greater quantities of cheaper, faster, and more useful information, they could increase their profitability and enhance their competitive positions in the global marketplace, etc., etc. On the surface, that seems to make sense. If you offer employees greater quantities of better information more quickly and at a lower cost, you should reasonably expect their performance to improve as a result.

Although in many situations where better performance resulted, even the improved information access often had little or no impact on people’s behavior. Most of us are aware of the risks of smoking. Yet millions of people still pick up the habit. Though there should be strong links between information and behavior in the enterprise, the real problem most executives face isn’t inadequate information, it’s the organization’s unwillingness to change behavior in the face of good information.

On an industry-wide level (micro level), some companies get strong returns on their digital technology investments. What seems true, however, is that on a macro level more money has been wasted on computerization than has been created.

No one denies that computerization and networking can add enormous value. But when we look at the numbers, it is clear that companies are not basing their computer investments on careful calculations of returns or added value. Other factors such as culture, politics, fashion, and competition also come into play. Best-practice methodologies often are irrelevant benchmarks for many companies investing tens or hundreds of millions of dollars in computers and networks.

There’s a fundamental difference between managing an information system and running a business on information, just as there’s a difference between operating a rivet gun and making airplanes. Managers intent on establishing technical systems subscribe to different values and practices than managers trying to set up productive business environments for their workers. Operating a business on information has a much broader array of interaction and interdependence than managing an information system.

When managers try to fit inflexible, mechanistic systems into organic contexts, they need new vocabularies to explain how people in organizations really use these systems.

Indeed, the word information loses its edge when redefined in business contexts; culture and politics and relationships may generally become at least as important.

Does the organization want to use its networks to centralize or decentralize responsibility? Does the enterprise want to make every bit of data accessible to everyone all the time? Or does it want to build a new information-access hierarchy into its intranet? Should individuals be rewarded for sharing information? Should people be encouraged to strike up electronic relationships with employees in other departments? Or should interdepartmental fraternization be deemed an inappropriate use of the network? For now, these rhetorical questions provide food for thought, however some of us encounter them in our daily business lives.

Conclusion

If an organization does decide to improve the way it shares information, it should focus first on changing the culture of sharing. Most information managers know little about designing incentives for enterprise collaboration, much less invoking it. That’s why responsible information departments have to insist from the beginning that effective enterprise computing and groupware don’t depend on transparency, replication, and semi-structured databases. They depend on how individuals are rewarded and punished for sharing and withholding information. They are about behavior, culture, and politics.

By: John F. Williams

Ten Reasons to Sell Your Information Technology Company

admin — Thu, 28 Jan 2010 02:03:24 +0000

For the past 20 years you have built your information technology business. Your company has become part of your identity. Even when you are not at work, you are working, thinking, planning. You never stop. If you sell you are leaving behind much more than a job. In this article we will discuss some reasons that might indicate that it is time to sell your information technology company.

1. Late in your working life you are faced with a major system re-write, sales force expansion or capital requirement in order for your company to maintain its competitive position.

2. A large competitor is taking market share away from you at an accelerating pace.

3. Your legacy system or competitive advantage has been “leap frogged” by a smaller, nimble, entrepreneurial firm.

4. A major company just acquired a direct competitor and will be aggressively growing the business.

5. Your fire to compete at your top level is not burning as brightly as it once did.

6. Your kids are not interested or are not capable of running the business.

7. You have had a health scare and have decided to smell the flowers.

8. You have lost a major client of a key employee.

9. The market is hot and you decide to take some chips off the table for asset diversification.

10. You exit in an orderly fashion and from a position of strength as you intended.

Lets look at these in a little more detail.

Major capital investment, system upgrade or sales force expansion required – You are supposed to be diversifying your assets, not concentrating them even further. Think about a simple payback analysis. Does that extend beyond your retirement date? You want to be able to defend that investment with the energy and intensity you devoted when you were originally growing your business. Maybe it is time to bring in an equity partner with smart money, an industry buyer with the management depth, infrastructure, or distribution network to protect that investment. You might consider selling now with a three-year employment contract. Let the new owner fund the required capital investment and defend that investment with his larger capital base.

A Large Competitor is Taking Market Share Away from You – Believe me, the news is not going to get better. As an investor you would probably sell the stock in a company you owned if Microsoft or GE decided to assume a presence in that market. Business owners often struggle with objectivity when a similar event takes place in their own company’s industry.

Your Legacy Systems have been “Leap Frogged” by a Nimble Entrepreneurial Firm – This happens all the time and can cause an erosion of your customer base. Your inertia will sustain you for a while, but eventually you will begin to experience customer defections. You can either rewrite, acquire or sell. If you decide to sell, do so before losing too many clients.

A giant company in your industry just acquired one of your major competitors. Watch out, they did not make this acquisition to maintain status quo. They want to grow their market share. They will be coming after your clients. The good news is that as a defensive measure, one or more of their competitors will be compelled to make a similar acquisition. It is best to be aggressively ahead of the curve and get acquired while the market is hot and prices are being bid upwards.

Your interest and competitive fire is eroding. Let’s face it, if you are not growing, you most likely are contracting. Your competition was tough when you were on your game. Your family’s net worth is under attack if you are no longer fully committed.

Your original plan was to turn your business over to your children. They may not be interested or capable of competing at this level. Perhaps the greatest legacy you can leave to your kids is to convert your company into a diversified portfolio of financial assets that are far less risky than turning complex company in a highly competitive industry over to inexperienced managers.

You have a health scare and all of a sudden you start thinking of all the sacrifices you made and all the things you want to do before it is too late. Your list of goals is immediately changed from financial in nature to family, friends, travel, experiences, philanthropy, etc. You might want to listen to your heart this time.

You have lost a major client or a key employee. That can be a real blow to a business. The owner, by nature, is optimistic and believes that the lost business will soon be replaced and does not ratchet down the expense level to match this new sales level. If he does cut, inevitably, it is not fast enough and not deep enough. Maybe it is time to seek a buyer that could replace that business before your company’s value is severely impaired as your profits erode.

The market is hot and you decide to take some chips off the table for diversification. You may be thinking of retiring in four years, but a consolidation is occurring in your industry and valuations are up 20%. Sell at the top and sign a four-year employment or consulting contract. The odds are that if you exit on your original schedule, valuations will have settled back down to the norm.

You ring the bell and exit on your own terms, from a position of strength, exactly like you planned. You are well aware of the competitive forces in the market and the relative strength or weakness in valuation multiples. You have prepared your business to be attractive to a strategic buyer. Everything is going your way. You hire a good M&A advisory firm to present you confidentially to the most likely buyers. Several recognize your value and show interest. You are able to get a little competitive bidding going. Your transaction value rises and your terms improve. You pull the trigger and complete the sale. Mission Accomplished.

By: Dave Kauppi

INFORMATION TECHNOLOGY AND INTERNATIONAL BUSINESS

admin — Thu, 27 Aug 2009 01:08:39 +0000

INFORMATION TECHNOLOGY AND INTERNATIONAL BUSINESS

By

Miss. P. PIRAKATHEESWARI, Lecturer in Commerce,

Sri Sarada College for Women (Autonomous), Salem – 16.

Introduction

           Computerization has changed the way business is conducted the world over. No aspect of business has remained untouched by the information technology (IT) revolution. This is especially true of international business where people located in different parts of the world conduct transactions with each other. The activities of international business include manufacturing, in-land transportation, customs and excise matters, port operation, shipping, clearing and forwarding, etc. During the course of these transactions, a large number of documents are created and exchanged, many of these documents or the information contained therein is repeated, while creating and mailing these documents before the advent of IT., hundreds of man-hours would be lost in repetitive operation, innovations in IT have revolutionized international business; the use of technology in managing and processing information. Especially in large organizations helps save time, bring down costs, and reduce manpower, manual data input and transfer has now become not only obsolete, but also irrational.

Areas

In international business today, IT finds maximum utility in the following areas:

1. Electronic procurement

2. Electronic marketing

3. Electronic logistics

             A modern competitive enterprise seeks to hold an edge over the market. IT helps provide this competitive advantage through its various applications tools. By adapting these tools in various areas of business, the organization can gain many advantages in terms of accessibility to a customer or supplier in any part of the world, speed of operations, reduction in man power, etc. due to the reach of the internet it is possible to conduct buying and selling transactions irrespective of geographical location. Internet banking helps in the speedy execution of payments and settlement of accounts. A website can be a virtual showroom, where products can be displayed, demonstrated, and sold. Such a website can also provide various after- sales service tips and suggestions, launch discussions forums, ask for customer feedback, and educate the customer. IT application such as electronic data interchange (EDI) has also enabled logistics operations to be paperless.

1. Electronic Procurement

E-procurement essentially comprises a number of inter-related methods for improving the procurement process through the use of electronic systems and processes. The need for e-procurement stems from the fact that in today’s globalized world, a manufacturer can source inputs such as raw materials, components, machinery and consumables from any part of the world. The manufacturer is constantly looking for suppliers who can offer quality materials at the most competitive rates. The internet has become a favourite hunting ground for the best bargains. Small companies can purchase their inputs through various websites, which sell a variety of items. However, for the larger organizations, electronic procurement is a systematically outlined process. Here, enterprises use automated applications to streamline buying both production and non-production goods and services.

            The entire electronic procurement process can be divided into three major components: pre-purchase, purchase, and payment activities. Pre-purchase activity can begin with a Request For Purchase (RFP) generated by the user department and sent to the purchase department. The electronic platform helps to plan pre-purchase activities starting with the vendor pre-qualification process. Vendors are invited to register their interest in a prescribed application form. They are asked to provide information about their organization, availability of resources, such as manpower, machinery, and monetary resources. Reference letters from their bankers help establish their standing in the market. A list of their present customers is also sought to gauge their market base. The short-listed vendors are registered and whenever there is a requirement of their services, a Request For Quote (RFQ) is sent to them. In case of very large purchase orders, venders are invited to bid in a competitive bidding process. Tender evaluations tools help identify the most suitable bid. A number of companies resort to reverse auctions, whereby, they announce the auction process on their website and ask the vendors to make their bids before the deadline. The bids are then opened and evaluated, before the contract is awarded to the selected vendor with the most suitable offer. This process is called a reverse auction because in this case the auction is for procurement instead of a sale.

Benefits of Electronic Procurement

Reduction in Manpower Cost Reduction in Purchase Cycle Time Wider Choice of Vendors Better Prices for the Purchased Goods Reduction in Transaction Cost Fewer Human Errors Better Relations with the Vendors Better Compliance with Regulations

2. Electronic Marketing

            Internet has changed the way we exchange goods for money. It has broken geographical barriers between buyers and sellers. The internet enables a manufacturer in India to sell his/her goods to a customer in any part of the world through the World Wide Web. It is necessary, however, that the buyer has access to internet and has the necessary know-how and desire to make online purchases.

            The internet has provided a very effective platform for electronic marketing or e-marketing. E-marketing means using digital technologies to help sell your goods or services. This is different from a conventional market place, where sellers display their goods and buyers can touch and feel the goods and bargain with sellers. In case of e-marketing, sellers can display photographs, video films and specifications of their products. In most cases, the prices are also displayed so that buyers have a clear idea about the product and price.

Benefits of E – Marketing

24*7 Connectivity – The buyer can access the seller’s website 24 hours a day and 7 days a week. Less Expensive – E-Commerce websites can be launched with a very small budget. The expenses involved are website development charges, web-space rental, hosting charges and website maintenance charges. Worldwide Reach – The biggest benefit of business over the internet is its global reach. Online Payment Facility – The buyer can make online payments via credit card. This facility speeds up the transaction, assuring the seller of payment. Measurement of Effectiveness – By putting a counter on the website, the seller can count the number of visitors to the website and the number of buyers who actually made on-line purchase. Ease of Operation – The buyer need not leave the comfort of office or home to purchase goods on the internet. The payment can be made with a click of the mouse and the goods can be delivered at the buyer’s door step. User-Friendliness – Most e-marketing websites are very easy to use. The buyer is guided through various procedures to purchase the good on-line. Many sellers have established call centers to be in direct touch with the buyer. Personalized Service – Visitors to the websites are normally advised to register themselves, so that each time they visit the website they are recognized and provided suitable services. Creation of Consumer Databases – The seller can keep a data base of the name, age, address, sex, contact numbers and important dates, such as birthdays and marriage anniversaries of online buyers.

3. Electronic Logistics

            Electronic logistics is use of web –based technologies to support warehousing and transportation management processes. E-logistics enables distribution to couple routing optimization with inventory tracking and tracking information.

            In international trade and distribution, computerization is slowly but surely tacking hold of every aspect of business. From computerized trade leads available through the department of commerce, to electronic letters of credit, to telecommunicated documents, to computerized freight booking, tracing and documentation system, to electronic freight tariffs, automated freight payment systems, computerized loss and damage reporting.

            There is a tremendous scope of the application of IT in logistics. In fact, modern supply chains are held together by the strength of IT, through its ability to transmit huge amount of data speedily, or make global data available to expedite the decision making process.

            Due to the advantages offered by IT, many logistics providers are planning to handle majority of their commercial transactions electronically. Also, exporters are already using IT for various activities ranging from e-procurement of goods to availing transportation services on the net.

Important Electronic Tools

            Shipping lines are keen to encourage their customers to use the internet and have developed a number of attractive tools. The biggest benefit of these tools is that both shippers as well as shipping lines gain by using them. Following are some of the important tools:

Electronic receipt of vessel schedule information Tracking and tracing of cargo Remote bill of lading (B/L) printing Single data entry reporting Exception reporting Online tendering, etc.

1. Electronic Receipt of Vessel Schedule Information

            Shippers can visit a logistics portal to check the schedule of different shipping lines and choose what suits their supply chains the best. This saves shippers time and effort. The shipping lines, too, benefit as they do not have to inform individual shippers about their voyage schedules. At present, the only limitation to this system is that not every portal maintains information about every shipping line, nor does every shipping line provide updated information on their sites or related portals.

2. Tracking and Tracing of Cargo

            The biggest benefit shippers enjoy as far as e-logistics is concerned, is tracking and tracing the cargo. With e-connectivity they need to spend less time per enquiry with shipping lines about the status of their cargo and significantly improve their supply chain visibility. However, different portals offer different services.

3. Remote Bill of Lading Printing

            The main benefits of this facility are reduced production and distribution costs for the carriers. The shipper’s gain is fast and error-free receipt of documents. More and more shippers are using this facility and are demanding simplified transmission of transport documents. One of the reasons for this is error-free transmission of Bill of Lading. Shipping lines normally dispatch the Bill of Lading within 48 hours of vessel sailing.

4. Single Data Entry Reporting

            With the aligned system of documentation, the format of various shipping documents is now standardized. Information once keyed in any document will automatically appear in all aligned documents. This system saves repetitive data entries and also saves substantial time and cost.

5. Exception Reporting

            Shippers across the world, who work tirelessly towards manufacture of quality products, also want reliable delivery schedules. Exception reporting by the shipping line helps the shipper to know if there are any deviations from the instructions, which he/she has given to the shipping line.

6. Online Tendering

            To find out the ocean freight rates from various shipping lines, the shipper has to send an enquiry separately to each shipper. Online tendering helps the shipper to send out rate enquiries to as many shipping lines as desired by merely pressing a button. Today, in the era of rationalization, mergers and acquisitions, the shipper’s global requirements are getting increasingly complex. Online tendering helps them get competitive quotations from shipping lines operating on various routes. These multinationals maintain databases of such quotations in order to choose the most competitive rates on various routes.

Conclusion

            Technology is changing at a very fast pace. Various aspects of electronic business such as e-procurement, e-marketing, e-logistics use a number of technology products. The life cycle of technology products is very short. We are living in a knowledge-driven era, where everyone has access to information thanks to internet and a variety of other sources of information. However, the market is dominated by those, who translate information into knowledge and use the knowledge to improve productivity and efficiency of their enterprises. India is enjoying an enviable position because of its leadership in the area of information technology. A number of business solutions are developed in India for world wide applications. However, such applications take a long time to be implemented in India itself.

By: P. Pirakatheeswari